Dairy farmers angry at milk price cuts

A group of Australian dairy farmers are extremely unhappy with the pricing decisions by Murray Goulburn and Fonterra to cut their respective farmgate milk prices.

Fonterra Australia late last week revised its farmgate milk price for the current season from AUD $5.60 per kilogram of milk solids (MS) to AUD $5.00 per kilogram. Fonterra’s announcement comes after Murray Goulburn, owner of Devondale, lowered its prices a week earlier.

A group called Farmer Power is now lobbying Federal Agriculture Minister, Barnaby Joyce over the cuts and urging another review of Australia’s dairy industry.

In March 2016, Fonterra described its results for the six months ended 31 January 2016 as “not satisfactory”. Murray Goulburn lowered its expected payout to as low as AUD $4.75 per kgMS citing the AUD dollar and poor performance of ready-to-consume dairy products internationally.

Murray Goulburn’s price reduction was announced at the same time the company’s Managing Director Gary Helou stepped down.

Fonterra blames dairy glut and Australian dollar

Fonterra said last week in its announcement that the revised price better reflects the reality of the supply and demand imbalance that is affecting global dairy commodity prices and has been compounded by the recent strength of the Australian dollar.

“Fonterra Australia is also offering its suppliers an interest-bearing support loan of up to 60c per kgMS that is linked to a supply commitment and is repayable from the 2018 financial year,” Fonterra said.

It is expected the price cut will reduce the cost of goods for Fonterra Australia by AUD $48. According to Fonterra, the price cut will also contribute to the reduction of opertaing losses in Australia.